December 1, 2011

PETRONAS to build a third LNG Terminal in Lumut

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is considering building a third re-gasification plant or liquified natural gas (LNG) terminal in Lumut, Perak, to address the shortage of supply requirement in the power sector and industry users in Peninsular Malaysia.

Its president and chief executive officer Datuk Shamsul Azhar Abbas said although it is still at the planning stage, Petronas sees the need for another LNG terminal due to the increasing demand for gas in Peninsular Malaysia.

"The plant in Lumut is our latest plan. What was confirmed basically is the terminal in Malacca, and Pengerang (Johor), which has the total capacity of 3.6 million or 3.8 million tonnes per year. Looking at the current gas demand, we have no choice but to build the third LNG terminal," he told reporters yesterday.

With the construction of these LNG terminals, Shamsul Azhar said the group has created a linkage between gas reserves in East Malaysia (Sabah and Sarawak) to supply the markets in Peninsular Malaysia or in the west.

He said the re-gasification plant in Malacca is expected to come onstream by July or August next year, while in Pengerang by 2015. Apart from these, he said Petronas is also constructing an LNG terminal in Lahad Datu, Sabah, which will be connected to the power plant which is jointly built by the group and Tenaga Nasional Bhd.

"Basically, we are bridging the gap between the east and west. It is unfortunate that most of our reserves are in the east, while the market is in west. So the availability of these terminals will bridge that gap," he said.

On the supply of LNG to these terminals, Shamsul Azhar said the company will import or obtain the source from Petronas' first floating LNG project in Kinawit field offshore Sarawak.

"What we have put in place right now is proceeding our first floating LNG project. We have decided that the first floating LNG project will be in Kinawit offshore Sarawak, with total capacity of 1.2 million or 1.3 million tonnes, to be commissioned by end of 2015," he said.

In the, meantime, he said the group also plans to go for the second floating LNG project, possibly in Rotan field offshore Sabah.

"We have not yet reached the final investment decision but we are thinking of having the second floating LNG project in Rotan, Sabah, which will have the total capacity of 1.2 million or 1.3 million tonnes.

"We are pushing for the porject to commission as early as possible by 2016," he said.

On top of these, Shamsul Azhar said Petronas is looking at proceeding with its plan to build and expand the LNG complex in Bintulu.

"We are going to fast forward again the plan to meet domestic requirement for gas supply. Instead of 2017, we are fast forwarding the project to be ready by 2015 with total capacity of 3.8 million tonnes per year," he said.

Asked on the proposal for the government, Tenaga Nasional and Petronas to pay one third of the extra cost to generate power as one of the efforts to alleviate the shortage of gas supply problem, Shamsul Azhar said as a national company, Petronas is agreeable to the proposal, but would certainly want the government and Tenaga Nasional to do the same.

"Being a national company, that is the role we have to play. We hope Tenaga Nasional and the government will play that part," he said.

However, he said the matter is still being discussed by the government, Tenaga Nasional and Petronas on the actual amount of expenditure the three parties need to fork out.

Shamsul Azhar said Petronas has been paying between RM18 billion and RM20 billion a year as subsidy for the gas supply and hoped that the government will revert to the market price by end of 2015.

"As far as the move to market parity for gas prices, the government has indicated that starting from June this year, the increase is going to be RM2 for every six months. If you take that into account, then the full market parity will be in June 2015," he said.

He said Petronas is proposing to implement a safety buffer for the gas supply, which is getting depleted.

"In the last three or four years, we have been producing gas flat out, without any margin. So, that is the danger of breaking out," he said.

In order to develop new reserves offshore, like the development of North Malay Basin, with the first gas coming towards end of next year, he said Petronas will not supply 100 per cent of that gas production to the domestic users but put aside 15 per cent of the production as the safety buffer to cover any crisis.

"Over the last five or six years, we have no safety buffer. It is time to start the safety buffer," he said. -Business Times